Want to be an industry leader in AUM growth rate? Start consolidating — but also be prepared for hurdles ahead.

Major acquirers and a platform provider of services for a large number of advisory firms sharply outperformed the five-year compound annual AUM growth rate of 11.7% for all RIAs, according to a new report by Cerulli Associates.

AMG Wealth Partners, which has a stake in a number of large wealth management firms including Veritable and Baker Street Advisors, posted an eye-popping 64% CAGR on the combined assets under management of all its RIAs from 2011 to 2016, according to Cerulli.

"There's an aura of success around consolidators now," she says. "Success begets success. Ten years ago, it was a much bigger risk to affiliate with a consolidator, especially for breakaway advisors. Now the path has become normalized, validating the consolidator model."

What could slow things down?

Platform providers like Dynasty, aggregators such as Focus, strategic RIA strategic acquirers like Mariner and United and private equity firms that are financial acquirers all face potential risks, says Kenton Shirk, Cerulli's director of intermediary practice.

While Dynasty has been the reigning leader in the outsourcing business, their largest and most successful RIA clients "might outgrow the need for its services," Shtyrkov says. "Dynasty has had a first-mover advantage," adds Shirk. "But that doesn't mean other firms won't try to replicate their success."

Consolidators like HighTower, which has relied on a steady stream of breakaway brokers to fill its ranks, also face challenges.

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"Consolidators may turn to existing RIAs to attract established advisors as a growth engine," says Kenton Shirk, Cerulli's director of intermediary practice.

The dissolving Broker Protocol that allowed brokers to leave wirehouses without fear of litigation could mean a "potential shift in recruiting and growth levels for consolidators," Shirk says. "Consolidators may turn to existing RIAs to attract established advisors as a growth engine."

Another potential headwind for consolidators is the increasingly high cost of making a deal, says Brooks Hamner, vice president at Mercer Capital, a Memphis-based business valuation firm specializing in wealth and asset managers.

"RIAs are very expensive right now," Hamner says. "The market has driven asset growth, and in turn earnings and revenue. And while multiples are not at peak levels, they're very close. If buyers want to maximize their internal rate of return, they may want to wait and pay a lower price."

But the lure of taking advantage of an RIA's operating leverage is hard for consolidators to resist, he adds.

"If the market rises 30% and there's no real cost increase, wealth managers can just watch their incremental revenue grow," Hamner says. "It's a business where fixed costs mean the margin just explodes."

Banks are likely to become more active RIA acquirers later this year, he predicts.

"A lot of bank clients are asking us about RIAs," Hamner says. "They're interested in the high margin, and it's a way for them to hedge against interest rate exposure."